JANAKI RAMAN,CHENNAI vs. DCIT, NCC-17(1), CHENNAI

The Assessee has raised the following grounds of appeal: “1. The order of the CIT (A), NFAC dismissing the appeal is contrary to law erroneous and unsustainable on the facts and circumstances of the case

Briefly stated facts of the case are that the appellant is an Individual deriving income under head “Salaries”. No regular return of income under the provisions of section 139(1) of the Act was filed by the appellant for the Assessment Year 2020-21. However, based on the information that the appellant was deriving income under “Salaries” and purchasing the securities, the Assessing Officer formed an opinion that income got escaped assessment from tax. Accordingly, a notice u/s.148 of the Act was issued on 30.03.2024 after duly complying with the procedure laid down u/s.148A of the Income Tax Act, 1961. The appellant filed the return of income in response to the notice u/s.148 for the A.Y.2020-21 on 22.08.2024 disclosing the total income of Rs.36,36,950/-. However, the appellant has not responded to the notice issued u/s.142(1) of the Act. In the circumstances, e-Assessment Unit of the Department (hereinafter called ‘AO’) had proceeded with framing the best judgment assessment order vide order dated 22.02.2025 passed u/s.147 r.w.s 144B of the Income Tax Act accepting the returned income.

Subsequently, the Assessing Officer had initiated penalty proceedings u/s.270A of the Income Tax Act for under reporting of income. In response to show cause notice, the appellant submitted that since no addition was made to the returned income, the question of levy of penalty for under reporting of income u/s.270A(ii) does not arise. However, the Assessing Officer rejecting above explanation offered by the appellant had proceeded with levy of penalty of Rs.18,17,456/- u/s.270A of the Act by holding that the appellant had suppressed/misrepresented the income of Rs.36,36,950/- vide order dated 29.08.2025.

Being aggrieved by the above order of levy of penalty, the appellant preferred an appeal before the ld.CIT(A) who vide impugned order confirmed the action of the Assessing Officer.

Being aggrieved, the appellant is in appeal before us in the present appeal. The Learned Counsel submits that the appellant had disclosed all material facts for the purpose of making assessment and there was no addition made to the returned income and therefore, there was no question of under reporting of income. He further submits that in the absence of clear finding by the Assessing Officer that the appellant had under reported the income, the penalty cannot be levied.

On the other hand, Learned Sr.DR opposed the above submissions submits that the appellant has failed to file the return of income within the time allowed u/s.139(1) of the Act.

We heard rival submissions and perused the material available on record. The question that arises for our consideration is whether the Learned CIT(A) was justified in confirming levy of penalty u/s.270A of the Act. Admittedly, the appellant had not filed the return of income under the provisions of section 139(1) of the Income Tax Act. The appellant had filed the return of income in response to notice u/s.148 disclosing income of Rs.36,36,950/-. The assessment was completed accepting the returned income. Therefore, the question that arises for our determination is, in such circumstances, whether it amounts to under reporting of income or not!. Clause(b) of section 2 of section 270A was amended by the Finance Act (No.2) Act, 2019 with retrospective effect from 01.04.2017 to include within the scope of under reporting of income as defined u/s.270A of the Act cases where assessee furnished the return of income for the first time u/s.148 of the Income Tax Act. The relevant clause reproduced here as under : “(2) A person shall be considered to have under-reported his income, if – …………………….. (b) the income assessed is greater than the maximum amount not chargeable to tax, where [no return of income has been furnished or where return has been furnished for the first time under section 148].”

However, the Assessing Officer had initiated penalty proceedings for under reporting of income. However, the penalty was levied for misreporting of income under Clause 270A(9) of the Act for “misrepresentation or suppression of facts”. Therefore, the penalty order is vitiated as the appellant was called upon to show why an order imposing penalty for misreporting of income should not be levied, but whereas penalty was in fact was levied for misreporting of income. Therefore, the penalty order is passed travelling beyond the scope of show cause notice, accordingly, the order levying penalty u/s.270A cannot be sustained.

In the result, appeal filed by the Assessee stands allowed. Order pronounced in the open court on 19th May, 2026.